Most Americans of a certain age can remember Penny Candy Counters at their favorite mom and pop variety stores. Penny candy and traditional mom and pop shops are rare today, but you can find torch rolls, Mary Janes, Jelly Beans, Red Hot, chewable wax lips and other old-fashioned favorites at specialty stores around the country.
One thing you may not be able to find in the future is Penny.
President Trump ordered the US mint Stop production of them. His announcement underscored the fact that taxpayers lose more than two cents each time a new penny is built. It is totaled: Mint in 2024 only Reported losing $85.3 million It was produced at around 3.2 billion pennies.
The decision has been delayed for a long time, but it was not Trump who killed Penny. It was inflation.
The real reason it's time to sell penny is that its value is (by definition) only one cent, but all other prices (including zinc, which accounts for 97.5% of the coin) are primarily due to the Federal Reserve inflation policy since the US adopted Fiat Money. This officially happened in August 1971, but could also be based on that in 1933, when the US left the Gold Standard.
In 1971, Penny still had some value. You can buy gumballs at the grocery store. In 1971, there was a consumer price index. 40.7;This January, Breaks past 319meaning that despite the penny's value being about 87% lower, the price is almost eight times higher. These increases are effectively made by the Fed.
As late economist Milton Friedman reminded us, inflation occurs when money supply grows faster than the value of the goods and services we produce. If the Fed had not increased its money supply more rapidly than the economy grew, then pennies are still worth it, and the cost of producing pennies would be about half a cent instead of 3.7 cents.
It's no wonder that many people no longer sit back and pick up the penny and take the penny jar to the Coinstar machine.
There are currently around $240 billion in circulation, and it is worth an average of about 700 or $7 per person. Reported by the Bureau of Labor StatisticsAverage revenue for January$35.87 per hour.
It's 3,587 pennies per hour, and in 3,600 seconds (60 minutes per hour) for an hour (60 seconds per minute, 60 minutes per hour), which means that Americans earn almost a penny on average.
The median hourly wage (half of all workers earn more points, half of them earn less) is slightly lower. It costs about $20 per hour. That's a little more than the penny earned every two seconds. So, even if pennies were made from thin air, our time is even more valuable, even if taxpayers didn't have to make bills for production.
When the penny disappears and the cash price rounds up to the nearest nickel, will the consumer be luke? After all, many prices end at 9. $1.99, $2.59, etc.
Because it is usually unlikely to buy multiple items, the final digits of the cash register receipt are essentially random, as all but five states (Alaska, Delaware, Montana, New Hampshire, and Oregon) collect sales tax. At least that's what I found when I looked up the data from 186,000 convenience store transactions.
What happens next? Previously, retailers simply got more from the bank when consumers threw pennies into jars rather than returning them to the retailer. After that, the banks will demand more from the Treasury Department, and the US Mint will make more.
Move forward and when the store runs out of penny after Mint gets out of the penny business, they can ask customers to take them. Maybe they will.
But ultimately, there aren't enough pennies to distribute, and stores tell customers that when paying in cash, the total is rounded up or down to the nearest nickel.
This is what happened in Australia, Canada, the Netherlands and other other countries that excluded a cent coin (or equivalent).
This doesn't happen overnight. It could take years. In the meantime, people will find that penny is less valuable as the Fed continues to lower our money. When they are completely worthless, they may live in our memories, but not in our daily commerce.
Robert Harples is a professor of economics at Wake Forest University in North Carolina;Independent Research InstituteOakland, California.
